News Release Distributed 11/02/12

FRANKLINTON, La. – While many agricultural producers have experienced improved conditions over the past few years, dairy farmers still are trying to recover from the hard years, especially 2009, according to LSU AgCenter researcher Mike McCormick, resident coordinator at the Southeast Research Station.

McCormick said with the farm bill postponed and support programs ending, many producers don’t know what to look forward to.

“The U.S. Department of Agriculture’s Milk Income Loss Contract Program (MILC) program ended on September 30,” McCormick said. “This program was very helpful to small producers like we have here in Louisiana.”

The MILC program, administered by the Farm Service Agency, compensates dairy producers when milk prices fall below a specified level. The program was part of the 2008 Farm Bill.

For dairy farmers producing less than 2.5 million pounds or about 290,000 gallons of milk per year, the program paid as much as $10,000, which was a nice bonus to help offset some costs, such as planting ryegrass, McCormick said.

“The MILC program was mainly designed to help the family farms because many of the larger farms out West are producing over 2.5 million pounds per month,” he said.

The biggest issue right now is that the 2008 Farm Bill has expired, said LSU AgCenter economist Kurt Guidry.

This means the support programs are unavailable for producers at this time and will not be available until it is either replaced by a new farm bill or a one-year extension of the 2008 farm bill is passed, he said.

Currently, no movement is expected on a farm bill until after the elections, during the lame duck session, Guidry said.

“There are two versions of the Farm Bill currently out there,” Guidry said. “One is the Senate’s version, which has been passed. The second is the version submitted by the House’s Agricultural Committee. That version must still be voted on by the full House.”

Once the House passes its version, then it along with the Senate version must go to Conference Committee, in which they try to pare it down to one bill. Once out of the Conference Committee, Guidry said, this bill must be approved by both the House and Senate.

“So, unless they take some shortcuts in this normal process, it seems highly optimistic that this all happens in the roughly one-month-long lame duck session,” Guidry said.

Many believe, given this timeline, that a one-year extension of the current bill will be the compromise.

A one-year extension does not automatically mean that everything from the 2008 farm bill would be extended, Guidry said.

“There is a possibility that they can vote for a one year extension with amendments,” Guidry said. “While I haven’t heard anything related to that for dairy, I have heard that they could do an extension but still eliminate the direct payments to row crop producers.”

McCormick said it’s not just the lack of a farm bill that is hurting famers, it’s the high input costs they are facing.

He expects the number of dairy farmers in Louisiana to continue to decline as fewer young people are coming in to fill the void of the older farmers who are getting out of the business.

“It’s an uphill battle for young people to get into the dairy business,” McCormick said. “It would take $1.5 million-plus to get into a medium- or small-size herd.”

Many of the young potential dairymen realize that a dairy of fewer than 100 head can’t afford to hire any full-time help, so they will be stuck running the operation alone, McCormick said.

In addition to age, feed and other costs are also forcing many farmers to exit the dairy business.

“Normally feed cost should represent somewhere between 30-50 percent of operating cost, but now that number could be 60-75 percent or more of the milk check,” McCormick said.

Ethanol subsidies of about 45 cents per bushel for corn has had an effect on keeping grain prices high.

“But in addition to the subsidies, droughts in the Midwest and demand from other countries have also pushed corn prices higher,” McCormick said.

Before the droughts in Texas and the Midwest, growers were able to find substitutes for corn, but now demand is stronger for cottonseed hulls, corn gluten pellets and soy hull flakes.

McCormick said dairy farmers are now looking at the byproducts of the ethanol industry for feed, such as dry distillers grain, corn solubles and corn gluten.

What’s bad for dairy farmers is a good deal for the row crop farmers, he said. “We’re not jealous of them, and they weren’t jealous of us when we were making money.”

The price of milk traditionally goes up just before Christmas, and McCormick expects some Louisiana producers to take advantage of the high cow prices at that time to get out of the business.

“Between now and May 1 we could lose a lot of dairies,” McCormick said. “I’m expecting somewhere between 20-25 percent.”